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Chapter 3: Q.12RQ (page 157)
Question :In the recording of depreciation expense, which account is credited?
Answer
The accumulated depreciation account is credited.
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Eastside Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements 1. Record the journal entry to record the original receipt of \(180,000 cash. 2. Record the adjusting entry that Eastside Magazine makes to record earning \)8,000 in subscription revenue that was collected in advance. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances after adjustments. (Ignore the Cash account.)
Identify the impact on the income statement and balance sheet if adjusting entries for the following situations were not recorded. a. Office Supplies used, \(800. b. Accrued service revenue, \)4,000. c. Depreciation on building, \(3,500. d. Prepaid Insurance expired, \)650. e. Accrued salaries expense, \(2,750. f. Service revenue that was collected in advance has now been earned, \)130
Question :The worksheet of Macey’s Landscaping Services follows but is incomplete. Requirements 1. Calculate and enter the adjusted account balances in the Adjusted Trial Balance columns. 2. Describe each adjusting entry. For example, a. Prepaid rent expires, $1,150.
Question :At the beginning of the year, Modish Advertising owed customers \(2,100 for unearned revenue collected in advance. During the year, Modish received advance cash receipts of \)6,100 and earned \(20,000 of service revenue (exclusive of any amount earned from advance payments). At year-end, the liability for unearned revenue is \)3,100 and unadjusted service revenue is $20,000. Requirements 1. Record the adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a liability account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance and additional unearned revenue in the Unearned Revenue T-account. 2. Record the adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a revenue account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance in the Unearned Revenue T-account and the additional unearned revenue in the Service Revenue T-account. 3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
Question :Chef ’s Catering completed the following selected transactions during May 2018: Learning Objectives 1, 2 Learning Objectives 1, 2 > Exercises May 1 Prepaid rent for three months, \(2,400. 5 Received and paid electricity bill, \)700. 9 Received cash for meals served to customers, \(2,600. 14 Paid cash for kitchen equipment, \)3,000. 23 Served a banquet on account, \(2,800. 31 Made the adjusting entry for rent (from May 1). 31 Accrued salary expense, \)1,600. 31 Recorded depreciation for May on kitchen equipment, \(50. Date May 1 \)(2,400) $0 Cash Basis Amount of Revenue (Expense) Accrual Basis Amount of Revenue (Expense) Amount of Revenue (Expense) for May Requirements 1. Show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting systems by completing the following table. (Expenses should be shown in parentheses.) Also, indicate the dollar amount of the revenue or expense. The May 1 transaction has been completed as an example. 2. After completing the table, calculate the amount of net income or net loss for Chef ’s Catering under the accrual basis and cash basis accounting systems for May. 3. Considering your results from Requirement 2, which method gives the best picture of the true earnings of Chef ’s Catering? Why?
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